The Chapala Bailout
“Your 401(k) is in the dumpster, and your home equity is all but depleted,” write Retire Early experts Billy and Akaisha Kaderli. “Retirement was right around the corner…or so you thought.
“But now what?
“Before you can plan where you might go from here, you need to know where you are now. So figure what you have. Do a full financial inventory to get a picture of what the downturn has done to your retirement prospects.
“Find the true value of your home from a service like www.Zillow.com, then subtract your mortgage balance. This will give you your current home equity.
“Then add any other assets, including stocks, bonds, IRAs, and any retirement accounts through your employer. Conservatively estimate the worth of your cars, expensive china, jewelry, boat, furnishings, coin collections, tools, artwork, etc….anything you own that has value.
“Add all this up, subtract any other debts you have, and you’ll arrive at your total net worth.
“Next you need to know your living expenses–the amount of money you are spending monthly or annually. Work from your past financial records.
“Then start the What If’s… What if you sold your house and car and had no mortgage, no monthly payments, and no debt? What would your monthly expenses be then?
“We understand that it’s a stretch for most people to consider selling everything…and you cannot live in a box, but stick with us.
“Just imagine that you did sell everything. If that capital were then invested, what rate of return would you need in order to generate enough money to cover your living expenses? Is this a doable proposition?
“Don’t forget that Social Security and any pension you might have will kick in at some point, supplementing whatever investment return your invested net worth produces.
“If your math brings you up short, here’s our recommendation: Begin looking at other areas of the world where the costs of living are lower. Mexico, Guatemala, Panama, Ecuador, the Philippines, and Thailand are a few retirement havens where North Americans and other expats have been living happily for years.
“Believe us: You will not be the first to pack up and leave the Land of the Free to carve out a more comfortable retirement lifestyle elsewhere. The countries we name above have been bargains for decades, and, with the recent rebound of the U.S. dollar, they are more bargain than ever right now.
“We’re living in charming Chapala, Mexico. We’re living well, and it’s costing us less than US$50 per day. With that, we pay for lodging, food, transportation, entertainment, and in-country travel. We eat well, play tennis, socialize, and travel comfortably. We want for nothing.
“Many here, in one of the largest expatriate communities in the world, live on less than we do.
“What would it cost you to live here? That depends on your lifestyle, of course–on the kind of house you choose to rent or to buy, on how often you dine out, on how you choose to entertain yourself and your friends…
“That said, here is a budget, drawn up from our own experience and research, for reference. Use this as a starting point.
“Let’s start with transportation. Most expats living here choose to own a car, but I don’t think this is necessary. Chapala is an easy place to be car-free. Local buses run every few minutes on a daily basis.
“The taxi ride into town from the airport costs 300 pesos; a taxi from Chapala out to the airport costs only 250 pesos.
“A bus ticket to Guadalajara is 37 pesos. Local bus fare is 6 or 7 pesos.
“Gasoline is 7.5 pesos per liter.
“Now, housing. This will be your biggest expense, no matter where you choose to live. Ajijic is more expensive than Chapala. San Antonio is comparable to Chapala.
“You can rent a small apartment in Chapala for about 2,500 pesos per month. Of course, you could spend a lot more…up to 5,500 pesos per month. If you rent through a real estate agent, the price likely will be listed in dollars…and it will be higher. Try to rent from a local Mexican and to pay your rent in pesos.
“Phone and wireless Internet cost 580 pesos a month
“Propane is 290 pesos per cylinder tank. You’ll use approximately one per month for cooking and hot water.
“Electricity will cost you 160 pesos every two months.
“It costs 13 pesos per kilo to have your laundry washed, pressed, and folded.
“Maid service is 25 to 50 pesos per hour for three to four hours once per week. Note that maid service is substantially more costly in Ajijic than in Chapala, and you may need to cover the bus fare for your maid to travel to and from your home.
“You can have your hair cut for 40 pesos.
“Entertainment is a wild card. You can spend as little or as much as you want to entertain yourself here. Chapala has excellent weather, so walking around and taking part in local activities provides a good deal of fun for free. There always seems to be a fiesta, a festival, or a saint’s day…
“Dining out is very affordable. A large plate of bar-b-que ribs with rice and beans is 60 pesos at Jose’s.
“We like Mi Tango in Ajijic. Here we recently enjoyed two steak dinners, one ravioli dinner, six glasses of wine, and dessert all around for 476 pesos.
“A matinee movie is 25 pesos per person. Tickets to The Little Theater are 125 pesos each…or you can arrange season tickets (six shows) for 625 pesos. You can’t beat that for value!
“How much you spend on groceries depends where you shop. We like to shop with the local vendors (as opposed to Wal Mart, Super Lake, or El Torito’s…and we save a lot of money that way.
“Today’s grocery list: 4 filet mignons, 4 filets of pork, 4 smoked pork chops, 1 roasted chicken with salad, tortillas, rice, 2 liters milk, 1 liter fresh yogurt, 1 jar mayo, 1 package prunes, 2 large carrots, 1 large red bell pepper, 1 large cantaloupe, 1 large papaya, 2 oranges, 7 limes, and 2 large bulbs garlic. Total cost: 360 pesos. At today’s exchange rate of 14.62 pesos to US$1, that’s about US$25.
“Medical care and medicines are reasonable here in town. Of course, for special or extensive medical problems, you might prefer to go to Guadalajara for care.
“The Casa De Ancianos de Chapala (House of the Old Ones) is a non-profit retirement home serving the Chapala area. The US$550 monthly charge, priced in U.S. dollars, includes room, board, a nurse always on duty, and a doctor who visits several times a week. Assisted care at home for a loved one 120 to 250 pesos for three hours.
“What’s the bottom line? Again, we’re living well, wanting for nothing, on about US$1,500 a month. But I’d say a couple could easily live well here in Chapala on as little as US$1,200 per month.”
P.S. You can read more about Billy and Akaisha’s overseas retirement adventures at their website: www.RetireEarlyLifestyle.com.